It takes money to make money.

This is especially true for stock investment and trading. Investing money involves a great deal of risk.

The first message a successful businessman will tell you is that any stock trading venture carries potential risk along with potential reward. The trick is to establish if the profit is worth the risk. If it is, it is now time to consider if you are prepared to take the risk.

But it doesn't necessarily mean that to achieve good profits, one has to invest heavily and risk deeply. A well-informed investor can make sound decisions that will help him make considerable profits with minimal loss.

So before you begin trading in stocks, ask yourself these questions:

a) What are your investment goals?

b) Are you ready to take bigger risks for better profits?

c) Are you prepared that your investments may lose money?

If you select a low-return investment, it will mean that either you increase the quantity you invest or increase the span of time invested.

Setting your investment goals will permit you to know how long you're willing to wait for a stock to achieve profit. It will also give you a threshold on how much you're prepared to lose. It gives you an idea on how to go about investing in a stock.

After you have made up your mind with the above questions, there are some tips you may want to use to assess your trading approach in order not to fail in stock trading.

Stock Trading Tips:

a) Discipline yourself

You are so excited to make trades that you trade on a stock that looks half-decent enough instead of waiting for the best stock to come along.

b) When to invest

Ordinarily, you want to trade all the time. You get excited when you see shares go up or when they drop. You make decisions based on a whim and factors that don't typically influence a stock in the long run. The best traders pause 50% of the time waiting and studying how a stock performs. They do not trade every day and all the time.

c) Don't be too emotional

Making money is exciting. Losing money can get very depressing. Detach yourself from your emotions; otherwise, you won't be able to look at things objectively.

In our last segment we introduced several types of stock market research. In this segment we will follow up our discussion of technical analysis and then continue on to fundamental analysis.

Technical stock research has become popular over the past several years, as more and more people believe that the historical performance of a stock is a strong indication of future performance. The use of past performance should not come as a big surprise. People using fundamental stock research have always looked at the past performance by comparing fiscal data from previous quarters and years to determine future growth. The difference lies in the technical analyst’s belief that securities move with very predictable trends and patterns. These trends continue until something happens to change the trend, and until this change occurs, price levels are predictable.

Fundamental Stock Research

The massive amount of numbers in a company's financial statements can be bewildering and intimidating to many investors. On the other hand, if you know what to look for, the financial statements are a gold mine of information.

Financial statement analysis is the biggest part of fundamental stock research. Also known as quantitative analysis, this involves looking at historical performance data to estimate the future performance. Followers of quantitative analysis want as much data as they can find on things like revenue, expenses, assets, liabilities, etc. This information, and not just its stock price, is what they believe will give insight into how a company's share price will perform in the future.

Fundamental stock research makes extensive use of ratios (comparing two pieces of information against one another). These ratios can be broken down into three primary areas: performance, activity and financing. Each of these areas has its own set of ratios which indicate the company’s performance in the given area.

Conclusion

The stock research you do prior to the purchase or sale of a stock can save you money in the long run. While no one stock research method can guarantee that you will always make money on your purchase, it can increase the likelihood of successful stock trading. By using a combination of technical stock research and fundamental stock research you can better gauge a stock’s past performance and, hopefully, draw conclusions about its future performance.

One of the most common pieces of investment advice is to find a good investment and to simply hold on to it. Known sometimes as buy and hold investing, it doesn't seem to be working as well as it once did. A common response of buy and hold advocates is to point to the success of some of the famous value investors. The most famous of the contemporary value investor is Warren Buffett.

Given that, it's fair to as how Warren Buffett investments been performing recently. Everyone knows that he's had investment returns of over 20% per year since he started investing, even better depending on which period of time you review. Most of us would be quite happy getting those returns.

Now Warren Buffett does have a few advantages over the average investor. He doesn't just invest in stocks, he invests in companies. His practice is to buy a large stake in a company, and he then gets to name the CEO of the company, and gets to choose one or more board members. Most of us average investors don't need to worry about choosing who runs as board members or who would make a good CEO.

Now with all those advantages, it's fair to ask how well he's done in the past several years. A lot of Buffett's reputation is based on history stretching back to the early days of Berkshire Hathaway in the 1960's. How has the "Oracle of Omaha" and his buy and hold approach done in the past several years?

The holding company for the collection of companies that he owns is Bershire Hathaway. So we can easily judge his performance by looking at the stock price. The Class A shares have recently become infamous for being one of the most expensive stocks on earth (trading recently at over $100,000 a share).

To accommodate more "average investors" several years back they introduced the Class B shares, trading recently over $3000 a share. So, you if you want to invest like Warren Buffett, taking advantage of his inside connections, you can simply buy the BRK Class B shares.

Let's take a look at their performance. After the Class B shares started trading, they initially went up just like you would expect from a work class investor averaging over 40% a year in 1997 and 1998.

Falling in love is easy, but breaking up is so hard to do. After spending hours pouring over numerous trading opportunities, you've found the perfect stock that meets your criteria and place your trade. During the day, you check out the share price, either smiling when it moves up, or losing that grin when it moves lower.

While we can never admit it, sometimes buying a stock is just like falling in love. We spend a long time looking for that one special someone, we get excited with every call, and sad when we can't be with them. Our heart moves on an emotional roller coaster depending on how things went on our last date. Amazing how emotion controls us.

The problem is, when we fall in love, we overlook some of the things that would normally make us avoid either that person, or, in the case of stock market investing, a company. Before long, we're wondering how to get out without causing too much pain.

Don't fall in love with your stocks. Fall in love with your kids, your spouse and other aspects of your life, but do not fall in love with your stocks. If you want to be a successful investor, you need to remove the emotion from your trading. When you have exited your position, do a happy dance or pout if you must, but don't let any emotions cloud your ability to make decisions.

Your mind will follow your heart. It will tell you that you should hold when you should sell, and tell you to sell when you should be holding. Don't fall in love with your stocks.

Where 90% of traders get it wrong is that they convince themselves that if they are down 40% already, there will be a bounce soon. Naturally, there is a small bounce as the shorts cover their positions. This provides a small pop and now our investor is down only 30%. Now emotion sets in, and convinces our trader that the worst is behind them since the trend is moving higher. Problem is, after the bounce, there is often no buying pressure, and the share price tests recent lows, and heads lower, turning a bad situation into an even worse one.

The most important factor in stock market success is controlling risk. Risk, of course, includes not only the possibility that you will lose money, but also the possibility that you will miss out on a chance to make money.

The Sensible Stock Investor uses a variety of methods for managing risk. One of these is timing. Timing means selecting the optimum point in time to make a transaction—to buy or to sell.

Much stock investment literature derides timing as a risk-control measure. Most advisers focus solely on asset allocation and diversification. For example, whenever you see statistics about how much of your money you ''should'' have in large-cap stocks, small-cap stocks, bonds, cash, etc., the recommendations are based on long-term performance statistics for those asset types. In other words, the advice is always based on the presumption that you will Buy and Hold each asset. That underlying premise is almost always unstated. The use of timing as an additional way to control risk is ignored or criticized as impossible.

However, to the Sensible Stock Investor, timing—that is, not Buying and Holding everything—is a valid risk-control technique. It turns out statistically that not being invested in stocks when they are going down contributes much more to positive returns than being fully invested all of the time.

Timing can be used in both buy and sell decisions. It helps determine when to purchase a stock (thus reducing the risk that you will miss out on a chance to make money on the stock), and it also helps determine when to sell it (thus reducing the risk that you will lose money on the stock). Even Warren Buffett—who is reflexively associated with Buy-and-Hold—practices timing. There are many times when he holds a great deal of his assets in cash—waiting for the right time to buy.

Therefore, timing is a tool in the toolkit of the Sensible Stock Investor to practice risk management. It does not fully control buy, hold, and sell decisions, but it does influence them. The idea is to have more of your money in the market when there is a greater chance for gain, and to have less invested when there is a greater chance for loss. The whole idea is to stack the odds in your favor as much as you can. Timing helps you do that.

Timing is based on ''indicators.'' Indicators are simply pieces of information that may be predictive of future performance. Thus, they are signals whether to buy, hold, or sell. We’d like to be more fully invested when the market is going up, and less fully invested—or entirely in cash—when the market is going down. Indicators can help us toward that goal.

Because individual investors cannot spend all day studying the market, the best indicators for the individual must be (1) readily available, (2) free, and (3) easily understood. It turns out that we can find such indicators without too much trouble.

For example, we can employ indicators such as broad market trends, broad market valuation, individual stock trends and valuations, economic trends, and interest rates. It turns out that a straightforward set of such indicators can be obtained for free, put together in a logical fashion, and kept up to date with relatively little expenditure of time and no expenditure of money. The result is called a ''Timing Outlook.''

The Sensible Stock Investor then uses the Timing Outlook to influence—but not totally determine—his or her decisions about when and whether to buy, hold, or sell particular stocks. The Timing Outlook is used in conjunction with the other tools of Sensible Stock Investing. The whole toolkit—selecting excellent companies, valuing their stocks, maintaining a well-rounded portfolio, using sell-stops, and so on—creates a sound latticework of complementary techniques. These techniques lead to superior results, principally because they help you to manage investment risk.

A word about psychology: The Sensible Stock Investor creates all his or her tools as objectively as possible—when he or she is thinking most clearly, not in the heat of a fast-moving market. Psychologically, it can be hard to follow any system which is giving a seemingly non-intuitive signal. But that’s why you have a system in the first place: So you can follow it when objective thinking is most difficult. The Timing Outlook helps take emotions out of the equation. That’s a good thing, because in finance and investing, emotions often point in the wrong direction. Level-headedness usually wins out.

Hollywood loves the stock market. The chaos of the stock exchange floor, the tension of boiler room day-trading, devious power brokers making back room deals; it all makes for great drama. Then you have the true-to-life stock market stories in the news: insider trading, big money IPOs, the dot com bust. All of it is enough to make you steer clear of the market for good and travel down a safer investment path. But don’t be frightened, history shows that long-term, there’s no better place to put your money to watch it grow. Here are a few tips to get you started.

Stocks 101

Simply put, when you purchase stock in a company, you become part-owner of that company. Along with other shareholders, you all combine as investors in the business, and therefore reap its rewards, or suffer its losses. Stocks are most commonly divided into separate categories depending on the size and type of the company (e.g., mid-cap, small-cap, energy, tech, etc.). While speculation can drive stock prices in the short term, it’s long-term company earnings that determine a stocks gains or losses. Speaking of short term, that’s when stocks are extremely volatile. Over a span of just a few months or years, stocks can climb to astronomic heights or drop to pitiful lows. But, since 1926, the average stock has returned over 10 percent per year. That’s better than any other investment vehicle out there, and that’s why stocks are your best bet for long-term investment.

Picking Stocks

Before you dive head-first into the market, there are a few things you should know about picking stocks. First, the market’s performance as a whole is not necessarily a reflection of its individual stocks. Good stocks can keep growing even in a down market, while bad stocks have the frustrating tendency to drop or remain stagnant in a strong market.

Also, remember that history is not indicative of a stock’s future performance. Even solid stocks can slip from time to time. Remember that stock prices are based on a company’s earnings outlook, not its past performance. If the future looks bright for a company, a $100 dollar stock is probably a good buy. If earnings look less than promising, even a $5 stock can be a waste. Finally, investors determine a stock’s value by measuring a handful of primary criteria, most notably cash flow, earnings, and revenue.

There are several factors which have influence on stock quotes. The price of a stock is always in fluctuation because it underlies the laws of supply and demand.

Stock quotes have a bid and ask price at all times. The bid price is the price where buyers are willing to buy. The ask price is the price where the sellers are willing to sell their shares. If ask and bid prices are matching then a trade is executed. The praxis is somewhat more complicated as the theory yet.

Usually there is always a spread between the bid and ask price. The spread is always changing together with the stock price, it can widen and narrow depending on the shares volume and market action. You can buy at the ask price but only sell on the lower bid price.

On the stock exchange a market maker or specialist is responsible to provide a current bid and ask at all times. His role is not only to act as an intermediate between buyers and sellers but more importantly to provide a market at all times. That means he must show a bid and ask price at all times where he is willing to buy and sell. If there are no other buyers and you are the only one who wants to sell for instance, then the market maker will buy from you at the price and volume he has shown.

For this work the market maker earns the spread. He has a high risk because he must buy and sell even if he finds nobody to pass the shares onto. That's why the spread widens when the stock is moving fast or when there is low volume. Under certain circumstances the spread can even be several dollars wide but usually the spread is a few cents only in very liquid stocks.

On the New York Stock Exchange (NYSE) the price is determined be the so called specialist in an "open outcry" system. The specialist handles all orders for a particular stock and he must match the orders at the greatest volume. Many believe there is no spread on the NYSE because they can't see it but there is one of course. The fee you pay for each transaction goes to the broker and not to the specialist. He earns the spread.

On the NASDAQ for instance these specialists are called market makers. Different markers makers are competing so there are different bids and asks at all times. In addition to that there are many different electronic communication networks (ECN) which posts bids and asks from private and institutional traders at all times. These networks are matching the bids and asks 100% automatically and electronically. These networks making their living from charging an ECN fee per transaction or per share.

Penny stocks, micro-caps or nano-caps are terms for stocks with a share price of $5 or lower and a very small market capitalization. Small caps are usually not listed on the major stock exchanges like the Wall Street (NYSE) or the NASDAQ but traded on the OTC Bulletin Board (OTCBB) or on the Pink Sheets.

Penny stock trading includes high risks but also offers high profit potential. Penny stocks can move several hundred percent within days which is one of the major reasons why people consider penny stocks. Another reason is that an investor is able to acquire a significant stake of a company with relatively limited capital. It would be impossible to become a major Microsoft shareholder without spending millions but with penny stocks you can do this with a few thousands.

There are several disadvantages of penny stocks which makes them only suitable for experienced investors. Fist of all there is a big limitation in available information. Since the companies don't have to file any reports it might be difficult to find reliable information about the company and its financial situation. Only companies with assets of $10 million or more have to file a financial report with the SEC but the SEC can't verify the informations provided.

The other disadvantage is the lack of public interest. Together with the small number of shareholders the market for a small cap is usually very small. This means that trading volume is low and widely open to manipulation. It's difficult to buy and sell stocks of this company. It even might be impossible to sell the stock for weeks.

The low trading volume makes the stock vulnerable to big price fluctuations, also called volatility. While higher volatility means higher risks, it seems that there lies the only big advantage of penny stocks. While it is almost impossible for a big listed stock like Microsoft or IBM to move hundreds or even thousands of percents in a short time, penny stocks can do this.

This is the one of the main reasons why penny stocks are often and always target of manipulations and scams. False information is published in the Internet and through spam emails to trigger a price move. Millions of Dollars each year are lost through penny stock scams.

While there is nothing bad with penny stocks in general, you should be aware of all the risks and that it is a major playing field of fraudsters. You need to be an experienced trader or investor to be able to trade penny stocks wisely. Just because it looks cheap to buy doesn't mean you can't loose much.

Despite some intensive searching online, I have been unable to locate a fact that I remember reading some months ago.

The fact was this: 80 percent of private investors lose money in their direct investments.

This is the secret that Wall Street does not want you to know. I guess it could be worse. I remember reading some years ago that 97 percent of all gamblers in the UK lose over time.

There are several reasons for why the majority of investors lose money. The main one is almost certainly due to knowledge. Whilst it is not my intention to suggest that insider knowledge is used, it is hard to imagine that some unscrupulous traders are not involved.

What is more important is that many or most private investors simply do not conduct enough research into the firms in which they plan to invest. Company accounts are not looked at or only briefly. Competitors are not assessed thoroughly.

The stock exchange is a very competitive place to make money. All those red braces wearing investment banker types take the game very seriously and so should we private investors if we plan to win.

In fact, the stock exchange is so competitive that at times even some of these investment banks fail to make a profit, despite all the advantages they hold over the rest of us.

Therefore, we private investors need to work very hard to compete. It is possible. The markets are so large that many private investors can earn a comfortable living online.

It is also vital to be disciplined and to follow investments and companies of interest very closely. If you need to sell out at a moments notice, the discipline to do so is required immediately. Failure can cost you your profits and potentially your initial investment as well.

As prices change, so must your goals. Using a stop loss or some variant can help your selling strategy, but when it is time to sell, you must.

Before you start on your own private stock exchange odyssey, you need to invest time and effort to learn the basic (and some more advanced) skills. These will help you for years to come. You then need to commit to continual improvement in your knowledge and skills. This is what will keep you up with 'the game'.

You may also find that you need some form of computer monitoring software. Many of the services allow real time price data. This will help you to accuately track your performance over time and alert you to any important news about your companies. For medium to large investors, such software is worth its weight in gold.

As time passes, you will need to understand the basics of asset allocation. This will help to prevent you from having all of your net worth tied up in company stocks and thus will help to provide more stability to your personal finances. As your net worth grows, it becomes ever more important to be diversified so that your future is tied less and less to the results of the stock exchange.

In conclusion, the stock exchange is a place where fortunes can be made and lost, but only the hard working are likely to prosper. Good luck.

The New York Stock Exchange (NYSE) is the biggest US stock exchange. It's recent acquisition of the fully automated stock exchange Archipelago formed a new company, the NYSE Group, which then became a for-profit organization and publicly traded in March 2006.

The NYSE consists of hundreds of member firms which must meet high standards. These member firms employ the specialists and brokers who are allowed to trade securities at the NYSE. The stock exchange is a market where buyers and sellers from all over the world meet to trade securities. Investor protection therefore plays a major part in all regulatory requirements. The regulatory requirements are high.

The NYSE is a self-regulatory organization but it's always under supervision of the SEC, the Securities and Exchange Commission. There is also the Securities Investor Protection Corp. which was established in 1970 by the US Congress. The SIPC covers losses up to $500,000 in the case a broker company goes bankrupt.

The New York Stock Exchange differs from other exchanges. Its so called open outcry system is an auction market where the specialist matches buy and sell orders at the best possible price. There are several trading posts on the NYSE trading floor. Each post is responsible for more than 100 different stocks. Each listed company is assigned to a specialist who must make the market in the stock and act as the middlemen between buyers and sellers. Only NYSE member specialists and floor brokers are allowed to trade on the floor. The floor broker acts as an agent for the public orders while the specialists matches the orders of the brokers.

It's often said that the auction system is not efficient compared to the fully automated exchanges like the NASDAQ but the NYSE specialists and brokers could handle up to 10 billion shares daily. The record day so far was 3.1 billion shares on June 24, 2005. The NYSE also introduced a new market system recently, the NYSE Hybrid Market which shall combine the traditional market system with automated trading systems.

There are different studies with different results. One says NYSE is better, the other says NASDAQ is. It's difficult to compare different systems though. Orders are executed faster on the NASDAQ because of the human intervention on the NYSE. But faster doesn't always mean better. The trading floor has advantages although it is slower. One study says that because of the non-competitive specialist system of the NYSE the costs for investors would be higher. Another study says that the spread at the NYSE is smaller than at the NASDAQ, especially with the large stocks.

“Life is full of uncertainties. Future investment earnings and interest and inflation rates are not known to anybody. However, I can guarantee you one thing.. those who put an investment program in place will have a lot more money when they come to retire than those who never get around to it.” -Noel Whittaker

Active investing is a strategy used in the stock market. People who are actively investing will buy and sell stocks regularly. They monitor the stock market and find way to make quick money. Most people are passive investors. They make long term investments which offer profit over a number of years. Active investors make short term, high risk investments which quickly increases their profits.

Active trading used to be something that only a financial professional could do. An investor would have to pay commission and management fees to their financial investor each time they wanted to buy or sell a stock. However, with modern technology the average individual can become an active investor. Active investors can now trade from the privacy of their own living rooms. It is quicker, easier and more profitable for the investor. Another great thing that active investing, online, offers is access to a wide range of research. Ten years ago, an investor would have to seek out a local professional investor for information and help. Today, traditional local brokers are becoming obsolete.

The difference between an active investor and a passive investor is time. For people who are saving for retirement and enjoy the comfort of steady and constant growth, passive investing works well. Passive investments include IRAs, Mutual Funds, and Bonds. However, there are some people who want to take a more aggressive and active role in their financial portfolios and they want their money now.

Becoming an active investor is not something you can just dive into. The key to being successful is being well educated and informed. Active investing can net an investor a 19% return on investments which are slightly more risky then long term investments that offer a 4% return. There are risks associated with active trading however most people find the benefits well worth the risk. The current trend is having a stock portfolio which is one part passive investing for the future. The other part of the portfolio is active and aggressive investing. This is a great way to balance and diversify a stock portfolio.

If you are interested in becoming an active trader all you need is a bit of education to move from low return to high return stock investments. This will allow you to make and use your money today not some time in the distant future. If you are interested and do not know where to begin contact a financial advisor who can point you in the right direction. In as little as two hours a week investing time, you can increase your investment profits drastically. Live the life you deserve, consider active investing today.

With the NHL, NFL, and NBA seasons ready for a new year, the large conglomeration of Disney (DIS) looks to boost guidance for its many enterprises during the fall to winter seasons. As a Dow component, Disney has helped propel the recent rally by recently reaching a 52 week high in aims of a very favorable market according to recent trends. However, with a recession looming should you be involved in such a company who basis a lot of its products on consumer expenditures?

The answer to this question simply is yes. It is true that the economy should be headed for a recession in the near future, but it does not necessarily mean that shares of Disney should fall. Recognized as one of the premier brands to both children and adults, even if income of consumers will fall as usually accustomed too during times of slow economic growth, the mass-branding Disney has propelled with its ESPN and ABC brands along with its origin television, movie, and theme park basics should have no problem attracting customers. The real growth however, should be apparent and incredible in the next few quarters. With three of the major four sports beginning this season, along with new premieres on ABC as well as other Disney affiliates, profits should rise to new levels signaling strength in this industry. As incomes have not fallen significantly yet, and employment still remains incredibly high, margins should surprise future and current shareholders as a net positive more than anything.

Some investors may be hesitant to believe such sentiments, but by looking at current trends of how Disney tends to perform during the months from October to April, the signs almost all lead to positive indicators. Except for 2001, which may have been the result of a total derail, shares of Disney have tended to rise each of these months signaling from about a decade signaling strong capital gains for investors. If such a trend was not reason enough to believe in Disney, when looking a fundamentals, there is almost no other company that can match Disney’s production. Posting positive margins on almost all levels each quarter each year along with a strong dividend ratio and PE ratio relative to its peers, the fundamentals for Disney should not be a negative detriment to any investor who studies this equity. It may be true that some of these margins may reduce in terms of percentages once the recession hits, but I believe that by April of 2007 any impact will be negligible in terms of investors warranting strong capital gains. Thus, I would strongly advise buying Disney at its current price but to be wary of keeping your shares past next April.

The term stock market, as the name connotes, is a place where you can market or trade a company's stock, which the corporation issues through shares in order to raise capital. Of course, capital is the cost that a company incurs in relation to producing its products and services.

The people who buy these shares are the shareholders, and the term can refer to an individual or an organization.

The term stock market can also apply to all the stocks available for trading (as well as other securities), for example, when used in terms like "the stock market performed well today."

The stock market involves the trading of bonds, which is a debt security that stipulates that the issuer of the bonds holds the holders a debt. It is exactly like a loan, only that it is in the form of a security. These bonds are traded over-the-counter, which means they are traded directly between two parties. Thisis opposed to exchange trading or the trading that occurs on stock exchanges or future exchanges.

The stock market also involves the trading of commodities, which refer to raw commodities such as agricultural products (coffee, sugar, wheat, maize, barley, cocoa, milk products) and other raw materials (pork bellies, oil, metals).

The stock market is different from the stock exchange, which is primarily concerned with bringing togehter buyers and sellers of stock and securities.

You can participate in the stock exchange as an individual stock investor or as major player (large hedge fund trader). Orders at a stock exchange are usually made through a broker.

There are two types of exchanges where stocks can be traded. There is the exchange that has a physical location where verbal trading takes place. This is the more famous type of exchange because it is often depicted on TV showing animated trader shouting at each other, waving and running around frantically. That's exactly how the stock exchange works. What happens is traders enter into verbal agreements on the prices of stocks. The other type of exhcnage is the virtual kind where traders deal electronically through computer terminals.

It is very well for any investor when the market is rising, when there are profits gained after a period of time. However, the stock markets can never be predicted, and suddenly the values may dip. This causes anxiety in an investor, and he may resort to panic selling in order to avoid further loss on his shares.

If the shares are required to be sold at any cost and when the investor needs some money, it is allright to sell a portion of his stock holdings. One need not sell if the basic management of the company and its standing in the economy is good even if the values fall in a bear phase. A wise investor would treat it as a buyer's market and would invest in some good stocks when the values are lower than usual.

There are many reasons which effect a stock market, the political changes in the area, the demand for certain products, the performance by the company as shown by its statements of account, and so on. Thus a bear phase is very good for a new entrant to the market, or for someone who wants to buy some shares. There is no need to panic if it is a down phase due to some political reasons in the region or some other temporary cause.

Thus a bear market is a good period to invest and not sell in panic. It might take some time before the stocks rise in value and the investor might make a decent profit.

That’s an excellent question. The quick answer is to make money but if we dig a little deeper we will see that the stock trader doesn’t just want to make money, he wants to make a lot of money. In fact, the stock trader is looking for larger returns that he would otherwise get by simply investing in a stock or a mutual fund.

It is true, however, that some people trade stocks for the action. These types of trades like the thrill of entering and exiting trades. Typically these traders trade frequently because they are more interested in the feeling they get from the action than the profits being made.

Profitable stock traders focus on profits. They are less interested in the action of stock trading itself and look at their trading as a business. These are typically the type of stock traders that continue to make money over the long haul.

In more traditional stock investing a big, long-term move is usually anticipated. Stock investors position themselves for this long-term move and look to make a profit.

Stock traders, on the other hand, look for profit opportunities within these long-term moves. In other words that stock trader realizes that there are numerous smaller moves that a stock will make during a long-term move. Stock trading looks to maximize profits by catching some of these smaller moves along the way.

The reason any of us should want to trade stocks rather than just buy and hold is that we want to make larger returns than buy and hold will typically gives us. If we were not seeking larger returns then it would not make sense to trade stocks because there is extra effort involved in taking advantage of the increased number of trading opportunities. Remember also with these additional opportunities come additional trades. With additional trades there are also additional transaction costs. We must keep these increased costs in mind because left unchecked they can mean the difference between profitable and unprofitable stock trading.

Why is it that some people are successful in trading the markets? And some people fail?

Critical Factors for Successful Day Trading

The ability to adjust to changing market circumstances is just one of the traits of a successful trader.

When money is on the line all traders emotions come into play and unless you can maintain discipline, success will elude you. The more disciplined you are in trading, the more profits you will make longer term.

Successful traders have learned to control their emotions, thus leading to more objective trading. Human emotions are always the key to either success or failure in any business. And it is especially important when trading the markets.

The simpler a system, the more likely it is to be robust in the face of changing market conditions. you need to understand your trading method, and the logic behind it, so you can execute it with confidence and discipline.

You must have an identifiable edge over the market.

Maintain self-control and discipline when making trading decisions: you must be confident in your trading method

You must execute the buy and sell signals with confidence - these signals will lead to trading success in the long run, as you rigidly adhere to your method.

Successful traders have one to three things that work and they use them over and over and over and over again for as long as they are profitable.

Successful traders protect their accounts. They respect the risks they are taking, usually no more than 2% of capital If your risk per trade is too aggressive then you run too high a risk of blowing your account, too conservative and you will not optimize returns from your system.

To really succeed at trading of any type, you need consistency, even if it's with small amounts. The ultimate goal is to keep trading over and over to eventual riches. Small but steady gains over time can add up to some truly massive numbers

You can't win if you're not in the game, and the way to stay in the game is through proper money management, risk assessment, position sizing, etc. Without these components most new traders blow their accounts out and never return to the game.

Learn from your losses - take advantage of each loss to improve your knowledge of the market. Most successful day traders have a true love or passion about their trading activities.

Successful day traders know that many of their trades will fail to meet the original objective. They do not, however seek to blame someone else for their loss, and they don't dwell on it. They attempt to learn from their mistakes and move on to the next trade.

Successful traders do not rush into trades. They take their time to select good trading opportunities and do not place orders simply for the sake of holding a position in the markets at all times. On some market days, where few good trading opportunities exist, they are content to simply stand aside and wait.

In day trading, a great deal of real-time information has to be absorbed, analyzed and acted upon in intense bursts throughout the trading day. This requires a great deal of concentration and stamina on the part of the trader, and the ability to avoid distractions. Day trading can be very hard work and a lack of concentration can doom a trader to failure.

Exit Losers quickly. Successful traders do not hang on to a losing position hoping the market will go their way eventually.

Scalp Traders look to take advantage of very short term trading opportunities. By entering and exiting a trade within a minute or two, develops confidence for the beginner trader, trading consistently without fear and without big drawdowns.

Trade Frequency

Scalpers tend to make several trades a day, accruing a number of small profits into a respectable daily total. Losses per trade tend to be minimal, from scratch ( breakeven) to a few ticks at most. A scalp trade would certainly never be held overnight. A small profitable scalp is the easiest trade to make. The whole secret is to get in and get out of the market as quickly as possible.

Requirements

Price spreads and commissions must be as low as possible in order to reduce the cost of doing business to a realistic proportion of turnover.

Data Provision and execution must be fast

A sufficiently large capital base in order to make the small targets and time spent monetarily worthwhile.

Scalping takes a lot of mental discipline, intense focus and quick reactions to be able to scalp successfully.

Scalping Strategies

Some scalpers work around the bid/offer, buying on the bid and selling on the offer to pocket the spread, or perhaps a tick or two more. Slightly longer term scalp trades are generally taken from three different trading patterns:

- Breakouts from consolidation
- Bounces off support and resistance
- Retracements in a trend. Retracement scalps may be taken with the trend following a pullback (certainly the lower risk of strategies) or, if the trader is sharp and brave, countertrend during the pullback.

What sets a scalper apart from other traders is that the profit target is likely to be small. While a longer term breakout trader might wait for the breakout to turn into a trend, the scalper will generally be happy to pocket a few points during the frenetic trading activity as the breakout occurs.

Some traders will scale out most of their position for a scalp but leave some on, in order to capitalise on further price movement, should it appear. Different market conditions often require different approaches so scalping can be a tool in the trader's box as opposed to the method always used.

Technical analysis describes different ways of predicting the future of the market you are trading.

Technical analysis helps identifying the type of market that exists, whether it is trending or range bound.

A variety of technical tools are used to help gauge good entry points. No TA tool by itself will give you reliable buy or sell signals. Learning how to read indicators is more of an art than a science.

There is no black box that will give you the perfect, accurate signal. However, the combining of the right group of TA indicators with discipline and adequate trading capital has been the road to fortune for many traders.

An important tool for determining the strength of a trend and whether a market is range bound is the Average Directional Index or ADX.

Measured on a scale between 0 and 100, readings below 20 are used to indicate a weak trend, while readings over 40 indicate a strong trend. ADX is not used to show the direction of a particular trend, rather to measure its strength.

Stay away from trend following trades if the ADX is below 20 and trending downward. Bollinger Bands are a popular study used across all markets.

They can be useful in both generating entry and exit signals and gauging trends. The basic interpretation of Bollinger Bands is that market prices will tend to stay within the upper and lower bands.

If price moves outside the BB this would suggest a continuation of the current trend. Bollinger Bands are best used along with other indicators, such as an oscillator like the MACD (Moving Average Convergence/Divergence) An indicator developed by Gerald Appel. By comparing moving averages, MACD displays trend following characteristics, and by plotting the difference of the moving averages as an oscillator, MACD displays momentum characteristics.

It is best to use only 1 indicator that shows overbought/oversold ie: stochastic and RSI

Moving Averages are lagging indicators and can be used as a trend follower, trend-following indicators work best when markets develop strong trends.

Through careful study and analysis, expertise with the various indicators will develop over time. As this expertise develops, certain nuances, as well as favorite setups, will become clear. It is best to focus on two or three indicators and learn their intricacies inside and out

Technical analysis describes different ways of predicting the future of the market you are trading.

Technical analysis helps identifying the type of market that exists, whether it is trending or range bound.

A variety of technical tools are used to help gauge good entry points. No TA tool by itself will give you reliable buy or sell signals. Learning how to read indicators is more of an art than a science.

There is no black box that will give you the perfect, accurate signal. However, the combining of the right group of TA indicators with discipline and adequate trading capital has been the road to fortune for many traders.

An important tool for determining the strength of a trend and whether a market is range bound is the Average Directional Index or ADX.

Measured on a scale between 0 and 100, readings below 20 are used to indicate a weak trend, while readings over 40 indicate a strong trend. ADX is not used to show the direction of a particular trend, rather to measure its strength.

Stay away from trend following trades if the ADX is below 20 and trending downward. Bollinger Bands are a popular study used across all markets.

They can be useful in both generating entry and exit signals and gauging trends. The basic interpretation of Bollinger Bands is that market prices will tend to stay within the upper and lower bands.

If price moves outside the BB this would suggest a continuation of the current trend. Bollinger Bands are best used along with other indicators, such as an oscillator like the MACD (Moving Average Convergence/Divergence) An indicator developed by Gerald Appel. By comparing moving averages, MACD displays trend following characteristics, and by plotting the difference of the moving averages as an oscillator, MACD displays momentum characteristics.

It is best to use only 1 indicator that shows overbought/oversold ie: stochastic and RSI

Moving Averages are lagging indicators and can be used as a trend follower, trend-following indicators work best when markets develop strong trends.

Through careful study and analysis, expertise with the various indicators will develop over time. As this expertise develops, certain nuances, as well as favorite setups, will become clear. It is best to focus on two or three indicators and learn their intricacies inside and out

When selecting a stock, I would suggest a long term investment, at least from one year onwards. A short term investor or a day trader would lose out on the dividends, bonus shares if any, and so on.

A day trader is one who buys and sells a particular share on the same day for the profits/losses to be made on the same day, or on the same business session that he chooses. More often he doesn't have much knowledge on the particular stock, and he depends on the stock broker to do the buying and selling for him.

A long time investor is more planned and has better knowledge of what he is doing.

Even if a particular stock goes down on a short period, one need not panic on a long term investment, if the stock is really good.

Be sure to check whether the management of the company is stable, check on the past performance of the company, nature of the products sold, and so on.

Start with a small amount and gradually build up a portfolio of good stocks.

I do hope the few tips given above will give some ideas to beginners in investment of stocks. I shall get back with more ideas later.